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Bank of Japan has four options for more easing: Kuroda

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Mr Kuroda has brushed off concerns that current easing poses an immediate threat to Japan's financial system.

Tokyo

THE Bank of Japan (BOJ) would consider four options for extra easing should prices lose impetus toward the central bank's inflation goal, governor Haruhiko Kuroda said in an interview with the Asahi newspaper.

Mr Kuroda emphasised his readiness to mull further easing should a hit to the economy threaten its inflation target, but insisted that price momentum was maintained.

"Of course we would consider additional easing in a situation where gradual momentum toward our 2 per cent inflation target wasn't sustained," Mr Kuroda said in the Feb 22 interview published on Saturday in Japan.

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The BOJ chief said he could lower the negative short-term rate or cut the long-term yield target below zero per cent. The bank could buy more assets including government bonds or increase the pace of expansion of the monetary base. A combination of these four options was also possible and in all cases the BOJ would minimise the side-effects of policy, he said.

The latest comments strengthen the impression that the BOJ is prepared to consider action should a deterioration in the economy and prices affect its inflation campaign.

Earlier in the week, Mr Kuroda said he would consider further easing if a stronger yen hit Japan's economy and inflation. The remarks come as Japan's economy shows sign of weakness while the outlook for inflation looks gloomy.

Trade tensions, China's slowdown and a winding down of tech cycle demand for semiconductors and other components are weighing on global growth, contributing to the biggest monthly drop in Japan's exports in more than two years in January.

Meanwhile, the effects of lower oil prices, government free education measures and further reductions in mobile phone charges are threatening to lower inflation toward zero or even below.

Mr Kuroda told the Asahi there was no change in his main scenario of relatively stable growth in the global economy. That's a view he also conveyed to Prime Minister Shinzo Abe in a meeting on Friday.

While it was true it was taking longer than expected to reach 2 per cent inflation, he still thought it was possible to reach the goal before his term as governor expired in 2023, he said in the interview.

Mr Kuroda also played down the possible impact of a scheduled sales tax hike in October, saying it would have almost no negative direct impact on the economy, though the bank needed to monitor its effect on consumer sentiment. Previous increases in the tax have triggered economic contractions.

Mr Kuroda also brushed off concerns that current easing poses an immediate threat to Japan's financial system, and ruled out a change to the 2 per cent inflation target. He said targeting one per cent or zero per cent inflation would just add pressure on the yen to strengthen over the medium term to long term. BLOOMBERG